An ever-growing influx of foreign workers is needed to address growing labour shortages, a Malta Employers’ Association wage survey has found, with more than half of all companies turning to foreign workers to deal with rising costs.
In fact, the MEA found that, at present, one-third of all employees in the private sector are foreign (60,000).
The economy’s growing dependence on foreign labour is creating massive challenges in Maltese society, the MEA said, with the body urgently calling for the government to create a national demographic strategy to address the issues surrounding sustainability.
“Economic growth strategies should be based on efficiencies and higher output per person, rather than on the increase in working people,” the report said, running contrary to the Prime Minister’s regular calls for an increase of 40,000 foreign workers to keep Malta’s economy stable.
The MEA spoke to the government about the issue in detail back in November 2017, however, there has been no response by the Government.
Local untapped labour markets, like females and elderly, will not be enough to match the labour supply, the MEA explained. Both groups have already increased given cultural changes, namely inflation driving females and struggling pensioners to the work place.
However, the body still proposed introducing initiatives to keep pensioners at work as a short term measure.
The public sector is key to shortages in the private industry
The public sector is also contributing significantly to labour shortages in the private sector, in particular for low-skilled workers. This should not mean that sector is immune. A lack of disparity between the salary grades means that there is a growing “brain drain” among the upper levels.
Meanwhile, the issue surrounding positions of trust in the government reared its head once again. With just under 700 persons employed in such roles, the MEA noted:
“The government is resorting to engaging persons in a ‘positions of trust’ with higher remuneration, to bypass the official salary scales of the public sector.”
“Persons on a position of trust need to be accountable and their remuneration made public,” the report continued.
MPs, the MEA said, should also be paid more and prohibited from occupying posts in the public sector.
Identity Malta is also addressed, with the MEA’s members flagging issues with the inefficiency at the state body. The MEA growth of thrid country nationals means that employers are reliant on an efficient system to ensure a growing labour supply.
The MEA also called for an end to measures that will only raise labour costs. The inclusion of further holidays in an economy already filled with plenty will only exacerbate the situation, the MEA explained.
Labour turnover and growing wages
Growing wages across the sectors means that the majority of business who conducted the survey (57%) are being pressured into increasing wages due to shortages, with most of them expressing concern concerning their competitiveness.
This, according to the MEA, means that the increase in wages is only not matching the profitability of companies, with further improvements giving rise to negative implications for many companies, namely in low-earning sectors.
Fears over sustainability and competitiveness do not appear to be slowing most sectors down, with 47% saying they will employ more people in the coming years. The only notable exceptions were manufacturing and the tourism sector.
Turnover of staff to higher-earning companies, most of whom benefit from the tax rebate system, is having a significant effect.
In the meantime, smaller businesses are being forced to keep raising their wages to compete, despite having little of the larger companies’ benefits.
However, gaming and financial services companies are also feeling the stress of growing wages. Coupled with the threat of tax harmonisation, increasing wage inflation could mean that these essential sectors could close up shop should the fiscal benefits stop.